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DIMENSION DATA

		DIMENSION DATA  25.2% www.dimensiondata.com

Dimension Data Holdings plc (Dimension Data) is a leading global technology company that provides solutions and services that enable businesses to plan, build, support, optimise and manage their IT infrastructures. Dimension Data is listed on the London Stock Exchange (LSE) and has a secondary listing on the Johannesburg Stock Exchange (JSE).

Dimension Data’s expertise lies in the technology areas of Network Integration, Converged Communications, Security, Data Centres and Storage (DCS), Customer Interactive Solutions (CIS) and Microsoft Solutions. The company applies its skills in consulting, integration and managed services to create customised client solutions. It is a global leader in the field of simplifying and consolidating IT infrastructures through Internet Protocol (IP) convergence.

With revenues of US$4 billion in the 2009 financial year and in excess of 13 800 employees in 49 countries, Dimension Data has a global footprint that supports highly personalised regional execution, while leveraging the domain experience and depth of a global business. With the acquisition of a business in Chile during the 2009 year, Dimension Data achieved Global Certification status with Cisco. Dimension Data is one of only 4 Cisco partners worldwide to attain this prestigious certification level.

The Company has an effective shareholding of 25.2% in the Dimension Data Group, held through R&V Technology Holdings Limited.

Overview of the six months to 31 March 2010
Dimension Data has delivered a strong first half FY2010 performance with improved metrics across the majority of the business.  The performance is particularly pleasing in light of the challenging trading conditions in many of the Group’s key markets.  In constant currency, revenue declined by 3.7% (reported currency increased 11.1%) to US$2 166 million while the operating margin improved by 0.4% to 5%, driving a 21% increase in operating profit to US$107 million.

The strong depreciation in the US$ against most of Dimension Data’s trading currencies (Rand, Australian dollar and Euro) impacted statutory reported results in US$ with revenues increasing by 15.6%.  Subsequent discussion of results in this section will focus on performance in constant currency except where noted.    

The Systems Integration (SI) business revenue decreased by 0.4% compared with the prior period, with operating profit increasing 15.8%. Within SI revenue changed as follows, Product declined 6%, Managed services increased 10% and Professional Services increased 3%. Product revenue growth was muted, reflecting economic realities and decreased client capital expenditure. 

The progress that was made since 2005 in widening the operating margin continued. Operating margin improvements came as a result of an increase in the gross profit margin from 21.8% to 22.7% which reflected excellent growth and execution in the Services business and good cost containment. The gross profit increased 15.7% while growth in the overhead base was contained to 14.2%.

Regional performances were strong, with the exception of the Plessey business which only operates in Africa.  All the regions increased operating profit except Asia, however this was according to a planned investment drive in the region.  The Americas and Middle East and Africa were good performers.

The Group’s lines of business continue to be well positioned in the current economic climate to help clients reduce costs and improve productivity and efficiencies. 

The Network Integration line of business performed adequately in difficult circumstances with a 5% decline in revenue. Converged Communications was flat compared with the prior year. The following lines of business increased revenue, Security Solutions by 11%, Microsoft Solutions by 21% and Data Centre and Storage by 14%. Customer Interactive Solutions revenue declined by 8%.

Outside the SI business, the Group’s regional businesses had mixed performances with - Internet Solutions (IS) increasing revenue by 10% and Operating profit by 11.7%. Plessey in the Middle East and Africa revenue declined by 51.4% and a US$1 million operating loss was realised. Express Data in Australia - revenue declined by 14% and operating profit declined by 17%.

The Express Data underperformance was a seasonal issue, which should normalise once the markets recover. Dimension Data management is addressing the Plessey underperformance and is confident that the business can be returned to profitability.

Group cash and cash equivalents totalled US$493 million at the end of the reporting period (2009: US$344 million).

BEE
The black economic empowerment equity transaction concluded by Dimension Data’s South African subsidiary in 2004 continues to deliver favourable results.  The equity vested at 31 March 2010 is 18.04%.

The future
Dimension Data is positioned in the sweet spot of IT and communications spend. The trends that have been driving superior growth in the Group over the past few years, have the momentum to continue to drive growth into the medium and longer term.  Dimension Data's network centric offerings are vital for their clients to be able to operate effectively in today's IP and convergence powered environment, where the network is increasingly the core platform for all forms of IT and collaboration, virtualisation and managed services position them for medium term growth.  In the longer term, market developments such as cloud computing and services based models such as Infrastructure as a Service, provide additional opportunities for growth.

The opportunity to deliver on Dimension Data's profitable growth strategy, which is premised on both growth and leverage, lies across all their businesses.  The opportunity to drive the SI margin higher lies in four factors.  The first of these is the ongoing effective rollout of their services strategy;  the second lies in harnessing the benefits of additional scale in a number of key markets;  the third involves securing additional efficiency improvements; and the fourth relates to recovery in a few underperforming geographies.  The low working capital requirements of the SI business make its return on assets the highest of all the Group's businesses.

Dimension Data is optimistic that the ongoing deregulation of the telecommunications market in South Africa and the growth opportunities on the African continent will provide significant opportunities for IS.

Plessey is well placed to benefit from the opening up of the African continent to growth in telecommunication services and they remain confident that the business has attractive medium term growth prospects.

Dimension Data is encouraged by the recent stabilisation in their end markets, however much uncertainty remains over the resilience of the global recovery.  They anticipate that the market segments in which Dimension Data operates will perform better in FY2010 and that the Group will be able to deliver modest constant currency revenue growth.  Dimension Data is well placed to capitalise on long term market trends.  Growth in excess of prevailing market rates and medium term operating leverage remain their key financial objectives.

Over the next three to five years, management have set themselves a revenue compound annual growth rate of 10% and are forecasting the operating margin to increase from the present 5% to 7% in the same time period. If this situation is realised in five years, it will have the effect of increasing operating profit at a compound annual growth rate of 20%.